Rio de Janeiro: Brazil's securities regulator proposed stepping up disclosure requirements for the 59 billion reais (Dh128 billion) asset-backed fund industry in the wake of an accounting probe into Banco Panamericano.
Banks administering the funds, backed by future cash flow and known as FIDCs, would be obliged to identify the original borrowers of loans of more than 5,000 reais that make up the assets of the funds, according to the plan posted on the website of the Rio de Janeiro-based regulator Comissco de Valores Mobiliarios. The new rules would also require banks to disclose information about the loan payments.
"The objective is to improve the supervision of FIDCs," Claudio Maes, manager supervising structured funds at the regulator known as CVM, said in an interview.
The industry, which in the past decade grew to 312 funds, came under increased scrutiny after the 2.5 billion real bailout of Banco Panamericano in November. The central bank is investigating Panamericano's accounting of credit portfolios sold to other banks, which often re-packaged the assets into FDICs.
Maes said the Panamericano probe didn't prompt the proposed regulatory change, which will remain on the CVM website until February 7 before a decision is made whether to make it official. The CVM and central bank planned on increasing coordination in regulating FIDCs and credit portfolios before the Panamericano investigation, he said.
Fraud allegations
Panamericano, the country's 21st-largest bank by assets, was bailed out on November 9 with a loan taken from the nation's deposit insurance fund by controlling shareholder, Silvio Santos, the 80-year-old host of a Sunday variety show. In addition to the central bank probe, prosecutors and police are investigating allegations of fraud by bank executives.
The bank doesn't comment on ongoing investigations, according to a spokesman at Panamericano's external press agency in Sao Paulo.
Panamericano was the fifth-biggest maker of FIDC funds after units of Itau Unibanco Holding, Banco Bradesco, Banco Votorantim and Banco Cruzeiro do Sul, according to data as of November 30 from Sao Paulo-based research firm Economatica.
Master Panamericano FIDC Subrodinada has 874 million reais in assets, while Master Panamericano FIDC Senior has 658 million reais in assets, according to Bloomberg data.
Panamericano's FIDC funds, which saw redemptions even before the bailout, were mostly made up of repackaged vehicle loans, Maes said. Total outstanding vehicle loans grew 45 per cent last year through November to 136.3 billion reais, according to the central bank's website.
"They suffered significant redemptions", said Maes.
"The outflows already started before, but accelerated a lot [after the probe]," he said.
FIDCs and other structured funds, including those backed by trade receivables, mortgages, and other consumer or corporate loans, saw 2.58 billion reais in redemptions in December, trimming inflows of 17.2 billion reais last year, according to the data on the website of Brazil's capital markets association.